The International Monetary Fund has agreed to lend Kenya about $447 million to help shore up its finances and boost its dwindling reserves.
The money includes an augmentation of about $216 million and brings the cumulative disbursements to Kenya under existing arrangements to about $2.4 billion, the Washington-based lender said in a statement Monday after the executive board completed a review of its loan programs.
The funds will be for addressing debt vulnerabilities, supporting the response to the Covid-19 pandemic and global shocks, and to enhance governance and broader economic reforms, the IMF said. While the East African nation’s economy remains resilient, “downside risks predominate in the near term,” it said.
The funds will help President William Ruto’s plan to urgently improve the nation’s fiscal position in a bid to avoid the economic crises that befell emerging and frontier markets this year, such as Ghana and Sri Lanka.
The president is targeting nearly tripling annual tax collections to 5 trillion shillings ($41 billion) in five years to ease the financial burden on a nation that currently spends more than half of its tax revenue on servicing liabilities, he said in an interview Friday.
The urgency for fiscal consolidation in Kenya was renewed last week when Fitch Ratings cut the nation’s credit rating to B from B+ because its high debt and increase in borrowing costs limits access to global markets.
The nation has been hard hit by its worst drought in four decades, the pandemic and Russia’s war in Ukraine. The shocks have worsened its twin fiscal and external deficits and drained foreign reserves that are below the critical level of four months’ import cover.